A dead cow bounce or more?

August 19th, 2015 at 9:00 am by David Farrar

Stuff reports:

Dairy prices bounced nearly 15 per cent in the fortnightly Global Dairy Trade auction overnight.

The rise is welcome relief for the beleaguered industry, with Fonterra earlier this month slashing the price it pays farmers for milk solids to $3.85 per kilogram from $5.25.

The drop in the payout came after dairy prices fell to half what they had been in 2013/14.

The overnight rise in prices followed 10 consecutive falls since mid-March.

 The overall price index rose 14.8 per cent, with whole milk powder up 19.1 per cent.

Will be interesting to see if this represents a trend, or is a one off bounce.

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This should see dairy prices now rise

August 10th, 2015 at 11:00 am by David Farrar

The Herald reports:

Andrew Little says another bad season for dairy farmers could cause New Zealanders to lose some of the country’s best agricultural land to offshore buyers.

The Labour leader said Fonterra had offered interest-free loans to some struggling farmers.

On the Q&A programme, he said banks had told him they’d help farmers for one tough season, but beyond that there were uncertainties.

There is a crisis in dairy…we do have some tough times ahead.” He told TV One

Thank you Andrew Little. To date there has been a 94% correlation between Labour claiming something is in crisis, and that industry then recovering strongly. Their manufactured manufacturing crisis has seen record job growth in manufacturing.

So having Labour declare a crisis in dairy, should see world dairy prices rebound.

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Academics claim NZ will in future be better off with no dairy industry!!

April 30th, 2015 at 2:00 pm by David Farrar

The Herald reports:

A peer-reviewed study authored by Massey University scientists has claimed that worst-case scenario costs to society from environmental harm caused by farming could equal the economic benefits of the dairy industry, creating a “zero-sum” situation for the country.

However, the paper, titled NZ Dairy Farming — Milking Our Environment for All Its Worth, has come under heavy criticism by economics academics approached by the New Zealand Herald today.

I’m somewhat surprised it got through peer review, after reading the critiques. Some extracts:

“The report does a good job in identifying some of the environmental harms from dairying, but, at least on a first reading, does not provide a reliable estimate of the value of those harms,” said Dr Eric Crampton, head of research at the New Zealand Institute.

He believed some of the tallied costs used in the calculations — such as harm a farmer might do to his or her own pasture through soil compaction where stocking rates were too high — should have never been considered “external” costs, while other costs appeared “over-estimated”.

This is the same fatal flaw that the BERL alcohol study had also – treating private costs as public costs. That is not a minor issue.

“The high-end estimates of the costs of nitrogen leaching, estimated at over $10 billion, seem to assume we would need to remediate all water in New Zealand to a drinking water standard — however, very few sites currently exceed nitrogen standards for drinking water.”

So it is based on the most far fetched scenario possible.

Dr Crampton also took issue with the upper-bound cost of the second largest cost component factored into the report, national dairy greenhouse gas emissions, which was put at over $3 billion.

“But that figure cannot be relevant for policy without considering relative greenhouse-gas intensity of dairy production in different countries and without considering the alternative uses to which dairy land would be put if it were not in dairying — and especially where the paper notes that dairy makes up half of New Zealand’s agricultural emissions,” he said.

“If every dairy cow in New Zealand disappeared, we would see more cows elsewhere and more beef and sheep production here. The net effect on greenhouse gas emissions is not particularly clear.

Exactly. It might indeed increase greenhouse gas emissions globally.

Professor Frank Scrimgeour, director of the Institute for Business Research at Waikato University, slammed the research as “sloppy” and argued its bold claims could not be substantiated.

“The authors do not do any original data collection, estimation or modelling,” he said.

“They synthesised existing data without ensuring that measurements are consistent through space or time.

And also:

University of Waikato professor of agribusiness Jacqueline Rowarth said it was “naive” to expect water quality in waterways could be restored to drinking water standards, and she noted people reading the study needed “to consider alternatives and relativities”.

“This sort of research doesn’t actually get us anywhere, and that’s disappointing.”

Federated Farmers point out:

“To give you an idea, the report used the 1980’s figure suggesting Taranaki had 40% of its sites exceeding the Drinking Water Standard.  If the authors had bothered to talk to the Taranaki Regional Council they would have found the more pleasing result of just 4% (cite pg. 17 of the 2014 Taranaki State of the Environment Report) of sites in Taranaki exceeding the Drinking Water Standard.”

So they were using 1980s data instead of 2014 data. Again how did this get through peer review?

But no doubt we will see this study promoted by the Greens as justifying their policy to get rid of as many cows as possibly.

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Not for Government to decide on what farmers do with their land

March 18th, 2015 at 1:00 pm by David Farrar

Stuff reports:

Primary Industries Minister Nathan Guy has scotched calls for a moratorium on dairy conversions in the Waikato.

Guy was unavailable to be interviewed, but in a statement said while discussions on the issue were welcomed: “I don’t believe we are close to needing a moratorium.”

Regional councils made decisions on consents and the Waikato Regional Council had approved the plans so obviously they were comfortable with the plans and the environmental impacts, he said.

Waikato Federated Farmers president Chris Lewis asked about the need for a moratorium and debate on further dairy conversions at the organisation’s recent monthly executive meeting.

He raised the issue citing concerns over water quality and availability and the cost of meeting tight new rules. The sector, which underpins the regional economy through a $4.2 billion annual contribution and more than 10,000 direct jobs, has grown dramatically, adding 270,000 more dairy cows in the past five years.

Lewis won support from the Greens and industry commentators.

In a free country, it is land owners who decide what they do with their land – not the Government. The thought of the Government deciding who is allowed or not allowed to be a dairy farmer is what I’d expect in the old USSR, not NZ.

Now it is quite appropriate for central and local government to have regulations around environmental impacts of activities, and also to regulate water access. And this already happens. But to have the Government just declare by fiat that no more farms can convert to dairy is ridiculous.

Guy said the issue should be the overall environmental footprint, not just the number of farms or cows.

“New conversions have to meet the toughest environmental standards – higher than for existing farms. They have to fence all waterways and have environmental management plans.

He said the industry had made huge strides in recent years with more than 90 per cent of dairy waterways fenced off.

Exactly. You regulate impacts, not inputs. If a land owner wants to convert to dairy and can meet the environmental standards, they have that right. They should not need permission of a Government.

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Greens trying their best to scaremonger and destroy the dairy industry

December 20th, 2013 at 3:00 pm by David Farrar

Stuff reports:

Milk from farms used as dumps for drilling waste will be tested for toxins, but the Green Party is calling for more widespread testing of Taranaki animal products.

The Green Party has previously called on Fonterra to stop taking milk from cows grazing on the farms in Taranaki where oil and fracking waste had been spread.

The party said the milk was unsafe and could threaten the reputation of New Zealand’s dairy industry.

The Taranaki Regional Council has previously dismissed the claims as scaremongering. The farms where the waste was spread were quarantined then underwent extensive testing before cattle were put back on them, it said.

One just has to hope that people overseas don’t take the Greens any more seriously than most people in NZ do.

I’m all for testing, but when a party claims that milk must be stopped even after testing has been done, they are just scaremongering.

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Best terms of trade in 40 years

December 2nd, 2013 at 2:52 pm by David Farrar

Stats NZ reports:

New Zealand’s merchandise terms of trade rose 7.5 percent in the September 2013 quarter, Statistics New Zealand said today. The latest increase was due to export prices for goods rising more than import prices.

“Dairy export prices helped lift the terms of trade to their highest level since 1973,” prices manager Chris Pike said. “Both the terms of trade and export prices have been on the rise since the start of this year, reflecting higher dairy prices.”

Terms of trade is a measure of the purchasing power of New Zealand’s exports abroad. An increase means New Zealand can buy more imports for the same amount of exports.

In the latest quarter, the price of exported goods rose 8.9 percent, while seasonally adjusted export volumes fell 2.1 percent. Both price and volume movements were strongly influenced by dairy products.

In the September 2013 quarter, dairy export prices rose 24 percent to their highest level since 2008, and are now 46 percent higher than a year ago. Seasonally adjusted dairy export volumes fell 2.7 percent, which is the fourth consecutive quarterly fall. Seasonally adjusted dairy product values rose 20 percent, following a 4.7 percent fall in the June 2013 quarter.

So which political party wants NZ to doubly decimate our dairy herd (reduce it by 20%) in order to fight climate change? I wonder how many votes know Green party policy is to reduce NZ’s dairy herd by 20%, at a time that dairy prices are giving us the best terms of trade in 40 years. It’s almost an economic suicide note.

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Are we ready for growth?

October 21st, 2013 at 9:00 am by David Farrar

Lian Dann writes in NZ Herald:

New Zealanders need to brace themselves for an economic boom.

It sounds crazy because good growth sure beats a recession, but after five years in the doldrums we may not be prepared for the strength of the rebound that economists are now tipping.

Next year the country will be “firing on all cylinders”, says Paul Bloxham, HSBC’s Sydney-based chief economist for Australia and New Zealand, in his latest report.

Bloxham is confident that we’ll be booming next year with GDP growth headed for 3 per cent and beyond.

His report, titled New Zealand’s boom, sets the tone for the way the rest of the world is starting to look at us.

Last week ANZ economist Cameron Bagrie noted that latest business and consumer confidence surveys were so strong they pointed to economic growth of around 4 per cent by early 2014. 

Bagrie was sceptical about that happening and suggested the economy might “blow a gasket” if it were to accelerate so fast.

But he concluded that New Zealand could be on track for GDP growth above 3 per cent, putting us amongst the strongest performers in the OECD. “It’s been a long time since New Zealand can claim such rock star status,” he said.

Even the IMF expects the growth to pick up to 2.9 per cent next year – ahead of the our Western trading partners (including Australia) and not far behind Asian nations like South Korea and Singapore.

I have to say it would be a nice problem to have! I’d rather have too strong growth than too weak growth!

So why the predictions for strong growth?

The reasons we’re on the up are simple. Dairy prices have stayed at record high through a period of concern about Chinese growth which caused hard commodity prices to fall. Meanwhile, we are on track for record dairy production. That’s a huge boost to an economy that gets about 20 per cent of its income from cows.

Then there is the Christchurch rebuild, which should be kicking into top gear and boosting domestic activity.

I am not sure it is correct to say we get 20% of our income from cows. Dairy does represent around 20% of exports but that is only around 3% of GDP, and I think most people would regard a reference to national income as being GDP not exports.

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The sectors some on the left want to close down

September 5th, 2013 at 1:00 pm by David Farrar

The Dom Post reports:

The oil, gas and mining sector is the most productive sector in the economy, with workers earning an average of $105,000 a year and generating $333 for each hour worked, a government report shows.

Yet this is the sector that the Greens and some in Labour want to close down. We have Labour leadership candidates saying they want higher wages yet opposing anything that allows for more drilling or mining.

Economic Development Minister Steven Joyce said oil and mineral exports, excluding coal, were worth $2.8 billion last year.

That’s almost as much as the promises made by the leadership candidates this week!

“If we want more and better-paying jobs and more money to invest in our schools and hospitals, then we need to keep making the most of our abundant energy and minerals potential through environmentally responsible development,” Joyce said.

Or we can just print money!

However, the government report shows the petroleum and minerals sector, including gold, coal and aggregates, generates $333 an hour worked based on the GDP for the sector divided by the number of hours paid. That compares with the average of just $48 for each hour worked.

And workers are paid on average $105,000 a year – more than twice the New Zealand average.

Filthy rich pricks! Tax them more!

Also in the Dom Post:

Driven by booming dairy prices, New Zealand’s terms of trade raced up almost 5 per cent in the June quarter as export prices rose at the same time as import prices dipped.

Another sector many on the left claim is bad for New Zealand and must not be allowed to expand!

It was the largest quarterly rise in the terms of trade in two years, as dairy prices rose 14 per cent in the June quarter.

More filthy rich pricks!

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